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International trade Essay

One can see through this example that the majority of structural changes made in the Cotonou Partnership Agreement have been in response to the implications of international trade liberalisation, rather than to address weaknesses in the predeceasing Lome Conventions. Two of the most important programmes under the Lome Conventions had been STABEX and SYSMIN, both of which were in charge of allocating aid to specific sectors (much of which was given in the form of outright grants).

Initially, under the first Lome Convention, STABEX focused on support for transport and communication, rural production, education and training, health, water, urban infrastructure, housing, trade promotion, industrialisation, emergency aid and subsidies to provide stability in export earnings. This was eventually downsized and under the following Lome Conventions priority was given to rural production. The second Lome Convention heralded the establishment of a System for the Promotion of Mineral Production and Exports (SYSMIN).

Both of these programmes continued to function throughout the fourth Lome Treaty with additional emphasis given to regional, social and cultural co-operation and supported by multilateral aid agencies such as the World Bank. ACP countries benefited greatly from these two bodies during the Lome Treaties, receiving 4, 089 million ECU under STABEX, and

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483 million ECU under SYSMIN with an additional 480 million ECU given in form of an outright grant. Of these loans, only EIB loans and risk capital needed to be repaid.

Under Cotonou, these two bodies were dropped in favour of a more general aid scheme that many ACP countries felt did not prove to be as much of an insurance. “Another major change from Lome to Cotonou was the move away from specific instruments to compensate ACP states for instability in export earnings.. to a more general facility which would provide assistance only if macroeconomic stability was threatened. Both STABEX and SYMIN had been highly valued by ACP states because they brought an element of predictability and security to export earnings..

” (Smith 193) As a consequence of the dissolution of STABEX and SYSMIN, there has been great controversy over future developmental proceedings among EU member states. The objective of ACP agreement compatibility with the WTO was shared by all, but there were disagreements on how this was to be achieved. The German government felt that the only way forwards was to normalise EU relations with ACP states to ensure equality between these and other Least Developed Countries (LDCs) not included in previous policies.

Similarly, Denmark, Sweden and the Netherlands were primarily concerned with safeguarding the interests of the LDCs and “were reluctant to perpetuate the colonial heritage of a few EU member states,” (Forwood) calling for the inclusion of the nine non-ACP LDCs into the ACP. France, on the other hand, with its strong historical ties to various ACP states was reluctant to minimise special trade agreements, as this would contribute to losses in agricultural revenue.

Ultimately, the decision was made to replace overall ACP preferential trade agreements with several free trade agreements between the EU and regional ACP groupings under the new policy name of Regional Economic Partnership Agreements or REPAs. Although this serves the purpose of enhancing local and regional competition and shows the potential of aiding the more economically successful ACPs, the remaining countries face a situation that seems substantially worse than those secured under the Lome Treaties as they run the risk of being marginalised further.

In addition to these disadvantages, exact criteria of REPAs remain uncertain and many of the stronger ACP states are also wary to negotiate REPAs in light of the unpredictability of the multilateral trading framework. “To all but the most optimistic, Cotonou heralds the de facto break up of the ACP group as divisions emerge between countries able to negotiate REPAs, and others having to opt for alternative arrangements.. In order to be compatible with the WTO, the Economic Partnership Agreements must meet the conditions of GATT..

yet the application of GATT rules depends in turn on what other WTO members are willing to accept. ” (Forwood 439) In light of the complications and intricacies involved in negotiating members states, ACP and LDC interests, it becomes increasingly more apparent that the Cotonou Partnership Agreement will have to be flexible enough to incorporate various different developmental schemes to find a compromise that will benefit most of these actors. The task becomes even more difficult as WTO mandates become even more liberalised.

Another issue that also needs to be addressed when assessing the probability of success under the Cotonou Agreement is the fact that other EU developmental policies are simultaneously being implemented around the world. Not only is potential prosperity in development being limited by the internal and regional political instability in the ACP, by EU protectionism and by global market liberalisation, it runs the risk of losing momentum as EU priorities shift to other developmental projects.

If one were to look at this trend cynically, one could say that, due to the rapid dismantling of preferential trade agreements by the WTO, the EU is loosing its strong and single grip over ACP markets and therefore shifting its focus to newly accessed Central and Eastern European countries. These states, in conjunction with select countries in Asia seem to have more potential for economic growth and, especially the new EU members will be more inclined to deal predominantly with the EU. “EU interregional policy has been successful in that it has been able..

to retain privileged political and economic access to ACP states.. It remains to be seen, however, because of the Union’s clear and increasing priority to Eastern and Central Europe.. if the relationship will remain important for both partners during the 20-year span of the new Cotonou Agreement. ” (Smith 197) The Association of South-East Asian Nations ASEAN comprising Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia have seen ongoing trade and development programmes since the 1980s.

China and Hong Kong have also been on the EU developmental agenda for over twenty years and are becoming of greater importance to the EU as competition continuously increases with the US. Attention has also been directed to southern Asia and will soon be receiving more EU financial aid once various political and social criteria have been met. The only way that these policies will stop detracting from the developmental programmes of the ACP is if trade liberalisation and co-operation between countries in this region increases.

However, it seems that EU and other external aid is needed first to assist in the establishment of institutions in order to create a foundation for such regional interaction. (This analysis is perfectly illustrated when looking at the structure of the Lome Conventions towards the ACP states. ) It has been proven that developmental policies undertaken with ASEAN and ACP are not compatible with each other because, up until recently, preferential trade agreements have made up the core of these policies. Naturally, this leads to a logical contradiction and results in the negligence of either ACP or ASEAN:

“The Union.. actively discriminated against key ASEAN exports through preferential tariffs offered to ACP states, for example coca and palm oil, and also obstructed access for those agricultural commodities that were directly competitive with EU products such as rice, sugar and tapioca. ” (Smith 205) (Through this example, one can again see the problems caused by EU protectionism and how this negates the purpose of the developmental policies they are promoting. ) Conclusively, developmental policies are becoming increasingly difficult to implement due to the main factors explored.

However, the Cotonou Partnership Agreement seems to be a positive way forward as it has proven to be flexible enough to tailor-make developmental schemes according to which type of ACP being dealt with. Furthermore, the inclusion of political, social and economic criteria under the Lome Conventions has laid a stable foundation for progress in inter and intra regional co-operation as it has minimised (but not eradicated) ACP dependency and has enabled local authorities and businesses to work with the new resources provided.

The eventual termination of any preferential trade agreements with all ACP and LDC states will be a difficult task and will include certain developmental set backs. However, based on the outlines of the Commission’s Green Paper, the structural modifications made to the Cotonou Agreement seem to adequately prepare both the EU and the ACP states to face this inevitability.

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